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To promote stable, constructive labor-management relations through the resolution and prevention of labor disputes in a manner that gives full effect to the collective-bargaining rights of employees, unions, and agencies.

This matter is before the Authority on exceptions to the
award of Arbitrator Robert G. Williams. The issue before the Arbitrator was
whether a decision to suspend the grievant for 10 days was for just cause. The
Arbitrator sustained the grievance and directed that the suspension be deleted
from the grievant's record.

Exceptions were filed by the Panama Canal Commission (the
Agency) under section 7122(a) of the Federal Service Labor-Management Relations
Statute (the Statute) and part 2425 of the Authority's Rules and Regulations.
The International Organization of Masters, Mates and Pilots Marine Division
ILA, AFL-CIO, Panama Canal Pilots Branch (the Union) filed an opposition to the
Agency's exceptions. We find that the Union's opposition is untimely. On April
19, 1988, we granted the Union until April 22, 1988, to file its opposition to
the Agency's exceptions. However, the Union did not file its opposition until
April 23, 1988. Therefore, we have not considered the Union's submission in
reaching our decision.

For the reasons discussed below, we remand the award to
the parties for resubmission to arbitration.

II. Background

The grievant, a Panamanian citizen, has served 4 years as
a pilot for the Panama Canal Commission (the Commission). On June 11, 1987,
while at a shopping center, he observed a political demonstration during a
period of civil unrest in Panama. Award at 2. Later that day, the grievant
transmitted the following message over a Commission radio channel while he was
operating a vessel in the Canal:

OK, roger. North 23 to transit. North 23 is going to be
stopped for 30 minutes. I repeat, I'm going to stop for 30 minutes at
Tavernilla Reach in solidarity with the rest of the Republic of Panama that is
today fighting for our democracy. No alternation or operational delay in
lockage timing will be the goal of this protest. . . . . . but to tell the
Panamanians out there, the Panamanians working in the Panama Canal share their
feeling of impotence against the National Guard trained and equipped to defend
our country, and mainly to defend this canal. But instead it's being used to
terrorize our own people. Anybody that wants to, I mean, [sic] join this, but,
. . . . . . . this pacific protest of solidarity is welcome. Just 30 minutes
for Panama, Over.

Award at 3.

According to the Agency, the grievant stopped the vessel
he was piloting for 30 minutes following this message. Agency's Exceptions at
4. However, no other vessel stopped, according to the Union. In addition, the
Union asserted that at most 50 employees heard the grievant's statement. Award
at 4.

The Agency charged the grievant with violations of the
Employee Code of Conduct. The sections cited by the Agency were:

Employees will abstain from any Panamanian or United
States political activity during hours of duty or service with the Commission
and will not use their positions with the Commission in the furtherance of
Panamanian political activity. (Section XXVII); and

Employees will not do anything which might result in, or
create the appearance of, acting in a manner inconsistent with the best
interest of the Commission. (Section I(c)).

Agency's Exceptions at 5. The Agency also states that the
notice of proposed suspension included references to the "deliberate stopping
of the vessel, his [grievant's] use of the radio for an improper purpose, his
political speech and his invitation to others to join in his protest."
Id.

On June 29, 1987, the Agency notified the grievant of a
proposed 10-day suspension. After the grievant replied, the Agency decided to
suspend the grievant from July 19, 1987 to July 28, 1987. A grievance, filed on
July 15, 1987, was denied, and the grievance was referred to arbitration on
July 20, 1987. The Agency approved a stay of the suspension on July 28, 1987.
An arbitration hearing was held on November 20, 1987. Award at 1-2.

III. Arbitrator's Award

According to the Arbitrator, the issue presented at the
hearing was:

Whether the Grievant was disciplined for just cause and,
if not, what shall be the remedy? Award at 2.

The Arbitrator noted the definition of just cause in
Article 11, section 2 of the parties' agreement:

"Just cause" means that the evidence produced from the
investigation of an incident supports the conclusion that the offense was
committed by the charged pilot and that the disciplinary action taken is
appropriate under all the circumstances.

Agency's Exceptions at 6, n.2. However, the arbitrator did
not apply the just cause provision in the parties' agreement. Rather, he
concluded that this provision was subject to the U.S. Constitution. Award at 5.
Relying on the Supreme Court's decision in Rankin v. McPherson, 107 S.
Ct. 2891 (1987) (Rankin), the Arbitrator found that the grievant
"clearly was commenting on a matter of public concern." Award at 5.

Since the grievant spoke about a matter of public
concern, the Arbitrator concluded that the grievant's statement on June 11,
1987, was protected free speech. Id. at 6. Thus, the Arbitrator
sustained the grievance and ordered the 10-day suspension deleted from the
grievant's record.

IV. The Agency's Exceptions

The Agency argues that the Arbitrator's award should be
set aside because it is contrary to law. The Agency makes three arguments.
First, the Agency argues that the Arbitrator erroneously determined that the
U.S. Constitution is applicable to the grievant, a Panamanian citizen. Second,
the Agency states that if the U.S. Constitution were applicable, it would not
protect the grievant's speech and actions. Third, the Agency states that the
Panamanian Constitution is not applicable in this case.

The Agency asserts that the grievant is not protected by
the U.S. Constitution. Citing early Supreme Court decisions, the Agency states
that the operation of the Constitution is "coextensive with the political
jurisdiction of the United States and has no extraterritorial effect." Agency's
Exceptions at 7-8. Therefore, according to the Agency, the grievant "has no
defense for his violations of the Employee Code of Conduct and the resulting
interference with the Commission's mission." Id. at 9.

In support of its second argument, the Agency states that
the Arbitrator failed to apply the Supreme Court's "balancing test" to
determine whether speech by a public-sector employee is protected under the
First Amendment. According to the Agency, the Arbitrator incorrectly limited
the test to whether the speech involves a matter of public concern. Id.
at 10. The Agency states that such issue is only a threshold question under
Rankin. The Agency asserts that the second prong of the Rankin
test must be applied if the employee's speech is found to involve a matter of
public concern. According to the Agency, Rankin requires a balancing
between the employer's interest in promoting the efficiency of public services
and the employee's interest in commenting on matters of public
concern.

Comparing the facts of this case to those in
Rankin, the Agency concludes that if the Supreme Court's balancing test
were properly applied, the grievant's speech and action would not be protected.
The Agency notes that the grievant's statements were made in "a highly volatile
political context in which they could have both internal Panamanian and
international ramifications." Agency's Exceptions at 12. Furthermore, the
Agency asserts that the grievant spoke over the radio channel used to
facilitate the orderly transit of vessels through the Canal and used a
privately-owned vessel under temporary control of the Commission as a political
platform. Finally, his statements could be heard by ship's officers and crews,
and the grievant encouraged others to stop work. Agency's Exceptions at 12-13.
The Agency adds that the grievant's actions could "impair harmony among fellow
employees, and more importantly, between the Commission and the Government of
Panama." Id. at 13.

The Agency's third argument responds to the issue of
Panamanian constitutional free speech protections which arose at the
arbitration hearing. The Agency argues that the Panamanian Constitution is not
applicable in this case.

In support, the Agency asserts that the application of
the Panamanian Constitution to the Panama Canal is limited by the Panama Canal
Treaty. Panama Canal Treaty, Sept. 7, 1977, United States-Panama, T.I.A.S. No.
10030 (hereinafter Treaty). The Agency relies on three articles in the Treaty.
First, article III grants the United States the right "to provide for the
orderly transit of vessels through the Panama Canal" and "to manage, operate,
and maintain" the Canal. Treaty, art. III, sec. 1 at 12 . Second, article VIII
of the Treaty provides that United States agencies and instrumentalities
operating in Panama pursuant to the Treaty are "immune from the jurisdiction of
the Republic of Panama." Id. art. VIII, sec. 2 at 22-23. Finally,
article IX states that "[t]he Republic of Panama shall not issue, adopt or
enforce any law, decree, regulation, or international agreement or take any
other action which purports to regulate or would otherwise interfere with the
exercise on the part of the United States of America of any right granted under
this Treaty or related agreements." Id. art. IX, sec. 8 at 25-26.
According to the Agency, these three articles prevent the enforcement of
Panamanian free speech guarantees "if to do so interferes with the Commission's
rights and responsibilities." Agency's Exceptions at 15.

V. Analysis and Discussion

We conclude that the Arbitrator's award is contrary to
law. We find that the Arbitrator misapplied the Supreme Court's balancing test
in Rankin and incorrectly concluded that the grievant's speech was
protected by the First Amendment. The record does not disclose whether, apart
from his incorrect application of Rankin, the Arbitrator would have
found that the Agency had just cause to discipline the grievant. Thus, we
remand the award to the parties for resubmission to arbitration.

A. The Agency Must Apply the U.S. Constitution in
Exercising Its Management Right to Discipline

The Agency's initial argument is that First Amendment
protections cannot be applied to the grievant, a Panamanian citizen, because
the U.S. Constitution has no extraterritorial effect. For the following
reasons, we find the Panama Canal Commission is required to exercise its
management right to discipline in accordance with applicable laws, including
the U.S. Constitution.

The Panama Canal Commission was created by the Panama
Canal Treaty to operate the Canal. This Treaty was signed by the Republic of
Panama and the United States on September 7, 1977, and became effective on
October 1, 1979. The Treaty restored territorial sovereignty over the Canal
Zone to Panama. Also, the Treaty granted the United States, operating through
the Commission, the rights necessary to manage, operate, and maintain the Canal
until the year 2000. The Treaty also conferred on the United States, as the
employer, the responsibility of establishing employment and labor regulations
for Commission employees. Treaty, art. X, sec. 1 at 27.

Consistent with the Treaty provisions, Congress provided
a system of labor-management relations for the Commission in the Panama Canal
Act (the Act), 22 U.S.C. §§ 3601-3871 (1982). The Act requires that
"[l]abor-management and employee relations of the Commission . . . shall be
governed and regulated solely by the applicable laws, rules, and regulations of
the United States." 22 U.S.C. § 3701(b). Commission employees are
specifically placed under chapter 71 of title 5, the Federal Service
Labor-Management Relations Statute (the Statute). See 22 U.S.C. §
3701(a) (1982). The Act states that in applying the Statute the definition of
"employee" will be applied without regard to the definition in section
7103(a)(2)(B)(i) of the Statute which excludes aliens or noncitizens of the
United States who occupy positions outside the United States. Id.
Therefore, the Commission's labor-management relations are governed by
applicable laws, which include the U.S. Constitution, and by the
Statute.

Also, the Statute requires that Federal agencies exercise
their management rights "in accordance with applicable laws." See
section 7106(a)(2). Of course, applicable laws include the U.S. Constitution.
Marbury v. Madison, 5 U.S. (1 Cranch) 137, 176-77 (1803) (finding that
the Constitution is a paramount law). Furthermore, we note that one of the
grounds for finding an arbitrator's award deficient under section 7122(a) is
that the award conflicts with law. Thus, in determining whether an arbitrator's
award violates law, we have considered whether awards are contrary to the U.S.
Constitution. In San Antonio Air Logistics Center, Kelly Air Force Base,
Texas and American Federation of Government Employees (AFL-CIO), Local Union
1617, San Antonio, Texas, 6 FLRA 412 (1981), the Authority considered a
union's allegation that the arbitrator's award violated the First Amendment
right of free speech. The Authority upheld the arbitrator's conclusion that the
union's instructions to its members to respond to a management survey in a
manner intended to invalidate the survey exceeded the limits and bounds of
freedom of speech and were unprotected by the First Amendment. SeealsoAmerican Federation of Government Employees, AFL-CIO, Local 916
and Tinker Air Force Base, AFLC, 30 FLRA 1204 (1988) (union failed to
established that arbitration award was contrary to U.S.
Constitution).

We conclude that the Commission must operate within the
confines of the U.S. Constitution in disciplining a Commission employee for
speech and a work stoppage during the performance of his duties as a Panama
Canal pilot. Therefore, we find that the Arbitrator appropriately found that
the Commission was limited by the guarantees of the First Amendment in
disciplining the grievant for his speech on June 11, 1987. However, we disagree
with the Arbitrator's conclusion that the Commission could not discipline the
grievant because his speech was protected by the First Amendment.

B. The First Amendment Does Not Protect theGrievant's Speech

The Agency's second argument is that if the U.S.
Constitution is applicable, a complete analysis under the Supreme Court's
balancing test in Rankin would result in a finding that the grievant's
speech was unprotected. We agree. Based on the discussion which follows, we
find that under the factors set forth in Rankin the grievant's speech
was not protected free speech because the Agency's interest in the effective
functioning of the Canal outweighs the grievant's right to express himself
freely while on duty.

1. The Supreme Court's "Balancing Test"

In Rankin, the Supreme Court stated that whether a
public employer has properly discharged an employee for engaging in speech
requires "'a balance between the interests of the [employee], as a citizen, in
commenting upon matters of public concern and the interest of the State, as an
employer, in promoting the efficiency of the public services it performs
through its employees.'" Rankin, 107 S. Ct. at 2896 (quoting
Pickering v. Board of Education, 391 U.S. 563, 568 (1968)). The
threshold question, according to the Court, is whether the employee's speech
may be "'fairly characterized as constituting speech on a matter of public
concern.'" Id. at 2896-97 (quoting Connick v. Myers, 461 U.S.
138, 146). The Court stated that this determination requires an examination of
"'the content, form, and context of a given statement, as revealed by the whole
record.'" Id. at 2897 (quoting Connick at 147-48).

The Court determined that the remark at issue in
Rankin was a matter of public concern. In that case, a clerical employee
in a county constable's office said to a co-worker, after hearing of an attempt
on the President's life, "'If they go for him again, I hope they get him.'"
Id. at 2894. The employee's statement was overheard and reported to the
constable, who fired her. In concluding that the employee spoke on a matter of
public concern, the Court noted that the statement was made in the course of a
conversation about the policies of the President's administration and that the
statement immediately followed a news bulletin concerning the attempted
assassination.

The second prong of the Rankin analysis "focuses
on the effective functioning of the public employer's enterprise." Id.
at 2899. The Court stated that "the manner, time, and place of the employee's
expression are relevant, as is the context in which the dispute arose."
Id. at 2898. Pertinent considerations include "whether the statement
impairs discipline by superiors or harmony among coworkers, has a detrimental
impact on close working relationships for which personal loyalty and confidence
are necessary, or impedes the performance of the speaker's duties or interferes
with the regular operation of the enterprise." Id. at 2899.

In Rankin, the Court concluded that the State's
interest in effective operation did not outweigh the employee's free speech
rights. The Court noted that there was no evidence that the employee's
statement interfered with the effective functioning of the office or that
management was concerned that other employees were interrupted or disturbed by
the employee's remark. Furthermore, the employee spoke in an area which was not
open to the public, and there was no suggestion that any member of the general
public had heard her statement. The court noted that the constable discharged
the employee because of the content of her speech. Id.

Finally, the Court examined the employee's position in
the constable's office in relation to her speech. The Court stated that "[t]he
burden of caution employees bear with respect to the words they speak will vary
with the extent of authority and public accountability the employee's role
entails." Id. at 2900. The Court found that the clerical employee had no
confidential, policymaking, or public contact role. After weighing the
constable's interest in the effective functioning of his office, the Court
concluded that his interest was not greater than the employee's free speech
rights under the First Amendment.

2. Application of the Rankin Factors

The threshold question is whether the grievant's speech
may be characterized as a matter of public concern. We note first that the
grievant spoke while on duty as a Panama Canal pilot and that this case is
limited to the question of whether the grievant's speech while on duty
was protected free speech under the First Amendment.

We find, as did the Arbitrator, that the grievant's
speech involved a matter of public concern. The grievant spoke at a time of
civil unrest in Panama and shortly after witnessing a political demonstration.
In his speech, he stated his intent to stop the vessel he was piloting as a
protest against certain events in Panama. Additionally, he directed his speech
to other Panamanians employed by the Agency and invited them to join his
protest action. Considering these facts, we conclude that the grievant
discussed a matter of public concern in his statement.

The second prong of the Supreme Court's analysis focuses
on the public employer's interest in the effective functioning of the
enterprise. In this case, the Agency disciplined the grievant for violating
provisions of the Employee Code of Conduct which are designed to protect the
ability of the Commission to operate the Canal. In this regard, we note that
under the Treaty the United States specifically accepted the obligation "to
provide for the orderly transit of vessels through the Panama Canal." Treaty,
art. III, sec. 1 at 12. Consistent with this obligation, Section XXVII of the
Employee Code of Conduct requires that employees abstain from any Panamanian or
United States political activity during duty hours.

In addition to the content of the grievant's speech, the
Agency considered other circumstances surrounding his statement in issuing its
notice of proposed suspension. The Agency noted that the grievant addressed
fellow employees in his speech and invited them to join his action.
Furthermore, the grievant's speech was made at a time of civil unrest in
Panama.

The Agency also noted that the grievant used the
Commission's radio channel. Agency's Exceptions at 5. This action made his
remarks accessible to others in addition to Agency employees. The Agency
explained that the radio channel used by the grievant serves to "facilitate the
orderly transit of vessels through the Canal by traffic controllers, other
pilots, ships's officers and crews, tugboat personnel and other Commission
employees." Agency's Exceptions at 12. Finally, the Agency included in its
notice of suspension that the grievant had stopped the vessel he was piloting
for 30 minutes. In our opinion, these considerations show that the Agency's
concern for the orderly and efficient operation of the Canal prompted its
disciplinary action against the grievant.

The grievant's position with the Commission as a Canal
pilot is also a factor under Rankin. A pilot is directly responsible for
carrying out the mission of the Commission. He is required to "board vessels
transiting the Canal, take operational control of those vessels and pilot them
through the Canal from ocean to ocean." Agency's Exceptions at 3. Seealso 35 C.F.R. § 105.1(a), (b) (1987). A pilot assigned to a vessel
has "control of the navigation and movement of such vessel." See 35
C.F.R. § 105.6 (1987). We note also that the grievant spoke from a
privately-owned vessel which was under the temporary control of the Agency. In
contrast to the clerical employee in Rankin who had no confidential,
policymaking or public contact role, the grievant here was in a position of
responsibility and in direct contact with customers using the Canal.

We also note that the Agency charged the grievant with
violating Section I(c) of the Employee Code of Conduct which states that
"[e]mployees will not do anything which might result in, or create the
appearance of, acting in a manner inconsistent with the best interest of the
Commission." Agency's Exceptions at 5. Given the content and context of the
grievant's remarks, it is not unreasonable for the Agency to conclude that the
grievant's statements and actions could appear to constitute intervention in
internal Panamanian politics. Such an appearance conflicts with the Agency's
mission under the Treaty. We also note that the United States and Panama are
parties to a treaty preserving the neutrality of the Panama Canal. See
Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal,
United States-Panama, Sept. 7, 1977, T.I.A.S. 10029. Thus, if the Agency had
not acted to discipline the grievant, its ability to fulfill its mission might
well be impaired. In these circumstances, we conclude that the Agency's
interest in the orderly and effective functioning of the Canal outweighs the
grievant's interest in speaking freely on a matter of public
concern.

In summary, we conclude that although the grievant's
statement involved a matter of public concern, it was not protected speech
under the First Amendment. We note particularly that the grievant occupied a
position critical to the effective functioning of the Commission. He spoke
during a time of civil unrest and included an appeal to other employees to join
in stopping work as a political action. Furthermore, his message could be heard
by anyone with access to the Commission's radio channel. Inasmuch as the
Arbitrator misapplied the Supreme Court's decision in Rankin and, thus,
incorrectly determined that the grievant's speech was protected under the First
Amendment, we find that his award is deficient as contrary to law.

C. The Panamanian Constitution is
Inapplicable

The Agency's final argument is that the Panamanian
Constitution is not applicable to this case. Although the Arbitrator did not
rely on the Panamanian Constitution in reaching his decision, his award
suggests its applicability. Specifically, the Arbitrator stated that the
Commission's Panamanian employees have "not only . . . a right, but an
obligation to participate in Panamanian affairs." Award at 5.

However, the issue in this case concerns only
disciplinary action arising from the grievant's conduct while performing his
duties as a Commission pilot. There is no contention that this case involves
the grievant's rights to speak and act on matters of public concern when he is
not on-duty as an employee of the Commission. See Agency's Exceptions at
12, n.5.

As we previously noted, the Treaty between Panama and the
United States gives the United States the right, through the Commission, to
provide for the orderly transit of ships through the Canal. Treaty, art. III,
secs. 1, 3 at 12-14. In addition, the Treaty obliged the United States to
establish a system of labor-management relations for all Commission employees.
Treaty, art. X, sec. 1 at 27. As a consequence, Congress provided in the Panama
Canal Act that labor-management and employee relations are governed
solely by the applicable laws, rules, and regulations of the United
States. See 22 U.S.C. § 3701(b). We also note that the Treaty
between Panama and the United States provides that the Commission is immune
from the jurisdiction of the Republic of Panama. Treaty, art. VIII, sec. 2 at
22-23. Considering these facts, we conclude that the Commission is obligated to
operate only under the applicable laws, rules, and regulations of the
United States in conducting its labor-management and employee
relations.

As we stated previously, the issue here is confined to a
labor-management relations matter--a disciplinary action and ensuing
grievance--which arose from the speech and actions of a Commission employee
while he was on duty as a Canal pilot. In these circumstances, we conclude that
the provisions of the Treaty preclude the application of the Panamanian
Constitution.

VI. Decision

Based on the record in this case, we are unable to
determine whether the Arbitrator would have found that the Agency had just
cause to discipline the grievant if he had not incorrectly applied Supreme
Court precedent. We also note that it is not clear whether the Arbitrator
considered the grievant's action of stopping his vessel for 30 minutes.
Therefore, we find that a remand of this case is appropriate.

Accordingly, we remand the Arbitrator's award to the
parties with the direction that they resubmit the award to arbitration for
further proceedings consistent with this decision. On receipt of an award,
either party may file exceptions with the Authority to that award.